Best ways to learn share trading in 2021

Volatility is on the rise in the stock market, and this means an increase in opportunities for both investors and traders. In this article, we will discuss the differences between investing and trading share CFDs and the best way to approach share trading.

1.Decide if you want to invest or buy and sell share CFDs

Investing generally involves buying shares to achieve long-term gains. On the other hand, trading is focused on short-term profit, and this can be achieved by playing both directions of the market. In other words, while investors are focused on the long-term prospects of a specific stock and hold their positions for years, traders might hold their positions for as briefly as a few seconds and try to capitalise on smaller price fluctuations. The benefit of using share CFDs is that you can profit from both a rising and a falling stock market and you may make use of leverage to maximise your profits – although the risk increases with that too.

2. Educate yourself on how the stock market works

The great thing about learning share trading is that there have never been more resources available for free than now. Traders might start with reading various books and/or e-books and then move on to videos and live webinars. If you prefer to have more guidance, you may opt for an online trading course with a mentor and live support. Whatever your preference might be, there is an abundance of materials out there that will help you learn share trading. It is important however, that you create a learning structure and define your personal goals before you jump from course to course.

3. Find a mentor

Finding a mentor to assist you with learning share trading can be useful regardless of your current stage. As a beginner, you could benefit from a professional mentor who could design a learning structure and guide you through the process. Later on, you may find inspiration and guidance by consulting your friends and family who are also actively trading shares or even online communities. There, you could exchange trade ideas but also discuss important topics such as trading strategies, risk management and trading psychology. 

4. Practice trading in a demo environment

A demo account offers you the opportunity to practice trading without putting any real money at risk. Demo accounts are useful for traders who wish to get familiar with their broker´s trading platform or wish to test out various strategies or expert advisors (EAs) without risking their capital.  To test a strategy, you could use backtesting, which involves using past data to see how a strategy would have performed. You may also make use of forward testing, which is the process of applying your trading strategy in the demo environment, i.e. you are actively monitoring the markets and acting on the strategy´s entry and exit signals.

5. Get an understanding of fundamental and technical analysis

The goal of fundamental analysis is to find the fair market value of a particular share by analysing a variety of factors such as the companies´ financial performance to macroeconomic factors and competitor analysis.

Technical analysis on the other hand is based on analysing charts. The assumption is that past price movements can be used to predict future price movements as price movements are not random and all publicly available information is already priced in.

It is not necessary to choose one of them exclusively, as they can easily be combined. Generally, short-term traders will prefer technical analysis, while investors tend to stick to fundamental analysis.

6. Open a live trading account

A demo account can be useful for testing various strategies and for getting a feel for the platform and the market in general. However, there are often no emotions involved in demo trading, as there is no real money at risk. While switching to a live account may seem daunting in the beginning, a sound risk management plan will help you with keeping your emotions in check and prevent significant drawdowns.

There has never been a better time to learn about share trading than now, with an abundance of free content and materials online to assist aspiring traders. Share CFDs give you additional flexibility - such as profiting from both rising and falling stocks - and with the right broker on your side, you can start your journey of becoming a successful trader.

Disclaimer:

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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